NOTIFICATION NO.56/2023, DATED 28.12.2023 – ULTRA VIRES OF SECTION 168 OF CGST Act, 2017

[Mr. M. GOVINDARAJAN]

Notification No. 56/2023

The Central Government issued a Notification bearing No. 56/2023-Central Tax, dated 28.12.2023 for the extension of relevant date for issue of order under section 73(10) of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) for the financial years 2017-2018 and 2018 – 2019, exercising the powers granted to the Central Government under Section 168A of the Act. The Central Government, in the said notification, on the recommendations of the Council, hereby, extends the time limit specified under section 73 (10) for issuance of order under section 73 (9) of the said Act, for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilized, relating to the period as specified below, namely:–

(i) for the financial year 2018-19, up to the 30th day of April, 2024;

(ii) for the financial year 2019-20, up to the 31st day of August, 2024.

Challenge of the Notification

The above said notification enabled the Department to issue so many show cause notices despite limitation for issuing show cause notices for the same is over. In ‘Merle Construction and Marketing Private Limited v. Union of India and others’ – 2024 (9) TMI 300 – Gujarat High Court, the petitioner challenged the action taken by the Department in view of the Notification No. 56/2023. The petitioner challenged the said notification for the following counts-

• The said notification so issued by the Central Board of Indirect Taxes and Customs is ultra vires Section 168A of the CGST Act, 2017 on the ground that there is no recommendation of the GST Council which is the mandatory requirement for the purpose of issuance of the said notification.
• The GST Council had made a recommendation extending the time limit for passing of the order under Section 73(9) of the CGST Act, 2017 for-

• the Financial Year 2017-2018 up to 31.12.2023;
•  the Financial Year 2018-2019 up to 31.03.2024; and
•  the Financial Year 2019-2020 up to 30.06.2024.

• On such recommendation of the GST Council the Department issued a Notification No. 09/2023-Central Tax, on 31.03.2023.
• Thereafter no Notification has been issued by the Central Government.
• But the Central Government issued the impugned notification extending the date for passing of orders without the recommendations of the GST Council.
• According to Section 168A of the Act, without the recommendation, the Government cannot issue the notification for extending the period under Section 168A of the CGST Act, 2017.
• For the above said reason the notification bearing No. 56/2023 dated 28.12.2023 is ultra vires the CGST Act, 2017.
• Even otherwise also the said notification cannot stand the scrutiny of law in view of the fact that the power to exercise under Section 168A is conferred only on the basis that there is a force majeure.
• In the present case, the COVID period being over and there being already an extension so granted and the reasons sought for extension as could be seen from a perusal of the Minutes of the 49^th Meeting of the GST Council that the authorities concerned are not in a position to carry out complete the audit, assessment etc. for lack of manpower.
• The said condition, under any circumstances, cannot be said to be a “force majeure”.
• There is a pari-materia provision similar to Section 168A of the CGST Act, 2017.
• There is no extension even for the Financial Year 2018-2019 and 2019-2020 as has been done by the notification bearing No. 56/2023 dated 28.12.2023.
• The GST Authorities of Assam also issued notification in line with the Notification No. 56/2023.
• The GST Authorities cannot nullify the provisions of limitation as set out in the Assam GST Act, 2017.
• Therefore, the notification bearing No. 56/2023 dated 28.12.2023 is to be rendered ultra vires the provisions of the CGST Act, 2017.
• The State GST Authorities cannot take the benefit of the Notification bearing No. 56/2023-CE which is also otherwise ultra vires the CGST Act, 2017.

The Revenue submitted that there is no recommendation insofar as the issuance of the notification bearing No. 56/2023 dated 28.12.2023. In view of a recommendation so made by the GST Implementation Committee, the said notification bearing No. 56/2023 dated 28.12.2023 has been issued. The ratification of the decision of the Implementation Committee by the GST Council is on the way. In view of the new Finance Bill, 2024 whereby various amendments have been suggested and are likely to be brought into the CGST Act, 2017 by issuance of necessary notifications, the Petitioner herein would be entitled to all the reliefs insofar as the assessment proceedings are concerned.

The Assam GST authorities contended that the authorities under the Assam GST follows the notifications which has been issued by the Central GST and as such said notification bearing No. 56/2023 dated 28.12.2023 shall also be applicable insofar as the Assam GST is concerned.

The High Court considered the submissions made by the petitioner, Central Government and Assam State Government. The High Court was of the prima facie opinion that it appears that the notification bearing No. 56/2023 is not in consonance with the provisions of 168 (A) of the Central GST Act, 2017. If the said notification cannot stand the scrutiny of law, all consequential actions so taken on the basis of such notification would also fail.

The High Court found that an examination would be required as regards the applicability of the force majeure in respect to the notification bearing No. 56/2023 taking into account the contents of the Minutes of the 49th Meeting of the GST Council. An opportunity has to be granted to the Respondent Authorities to place on record their stand as well as bringing on record the materials on which they claim the applicability of the force majeure.

The High Court held that the Petitioner is entitled to an interim protection pending the notice.